Goldman's John Noyce (part of the firm's trading desk) has released his most recent barrage of technical analysis and charts, confirming our running expectation that a drop in stocks is now widely anticipated by the charts. In addition to extended commentary on FX, Bonds, Curves, and the VIX, Noyce notes the following on the S&P: "as discussed in recent client meetings, while the timing is difficult, we remain concerned that a larger topping structure is still being formed on the S&P – which will eventually lead to another meaningful decline." Has everyone, Goldman included, now gone from bullish to bearish in the span of two weeks?
In the S&P:
Arguably the market could still be forming a larger H&S top; This would fit well with some further downside correction in risk correlated FX currency pairs.
If Friday’s close is below 1,101 the market will post a bearish weekly reversal from the high of the recent recovery
In conclusion, as discussed in recent client meetings, while the timing is difficult, we remain concerned that a larger topping structure is still being formed on the S&P – which will eventually lead to another meaningful decline.
There are certainly a number of warning signs that the last stage of the USD-weakness trend we have been looking for (EURUSD to 1.35-1.37) is unlikely on a tradeable horizon; Overall, as an overview chart this warns of a material turn in the broader trend of the G10 currencies versus that USD.
Once the market eventually broke lower in late-July (a similar time of year to now) the market [in AUDUSD] began the sharp drop into the October ‘08 lows
If Friday’s close is above 23.89 the market will post a bullish weekly reversal from the base of the recent down move
Beyond the significance of VIX patterns for the S&P they’re also important for broader markets as in the vast majority of cases a broader swing in risk appetite will take place across asset classes. (not today's implied correlation)
Following last Friday’s poor data yields broke from their July range
The multi-week chart still looks like a big double top targeting 2.2%
On the Curve Shape:
The 10-year/2-year curve is continuing to flatten: The ultimate target of the 200-week moving average now stands approximately 66bps below current levels